Labour’s Autumn Budget 2024: Impact on Holiday Lets

The labour government has announced that there will be increases to Stamp Duty Land Tax (SDLT) for second home purchases: this is the tax that you must pay if you purchase property or land above a certain value. This announcement might cause panic for people hoping to buy a second property, but with regards to holiday letting in the UK, the labour budget doesn’t necessarily mean bad news.

What is in Chancellor’s budget for October 2024?

Amongst other significant changes, labour has announced that from 31 October 2024, SDLT further charge for additional property purchases (think holiday lets, buy-to-lets and second homes) will rise from 3% to 5%. The new rates will apply to people buying a second ‘residential style’ property and not pure commercial.

While at first glance, this appears to be yet more unwelcome news for the holiday letting industry by driving up costs for landlords, when you look under the surface you will see that the issue is more complex and doesn’t mean ruin for landlords. In this article, we will show you that there is something else happening in the market that is driving holiday let purchases; here at HCM, we can confirm that during October 2024, we saw a surge in enquires and new mortgage applications for holiday lets which, when compared to October 2023, was up by over 31%.

The autumn budget’s rules around holiday let stamp duty must be examined in a wider context: the increased cost of stamp duty in relation to the current condition of the holiday let property market. While the former might be high, there are other changes happening which will benefit potential buyers.

So, what’s happening in the holiday let property market?

Prior to the budget, the government revealed plans for a change in council tax for people who own a second home. Local councils have been given power to increase council tax for people who own a second residential property and don’t rent it out to tourists.

In some cases, local councils have increased the council tax on such second properties by 300%, causing the people who own a second home to suddenly face huge bills amounting to thousands of pounds per annum.

The effect of the change to council tax has clear consequences: people will either want to sell their property and avoid an exorbitant council tax bill or utilise that second property by renting it out as a proper holiday let.

A flood of quality holiday let properties hits the market

For obvious reasons, there’s been huge panic among people who own a second home. Owners are worried about massive council tax bills and many are rushing to sell their second property. Whilst this is tragic news for those people, it’s good news for holiday let buyers as now, quite uniquely, an abundance of quality properties are coming onto the market, in great coastal and country locations.

At the time of writing (November 2024) property prices for these types of homes has fallen by more than 10% which is welcome news for holiday let buyers. These properties aren’t very affordable for first-time buyers as they are mostly substantial properties (think 3-5 bedrooms) in prime locations and so they cost considerably more than the national “average home”. Nor are they good choices for buy-to-let investors due to their more rural locations away from big cities and towns. However, they are ideal targets for potential holiday let owners. 

What does this mean for holiday lets?

What we are seeing at HCM is an unprecedented buying opportunity for people who wish to purchase property with the aim of holiday letting and want to hold the property for significant period of time, generally 15-20 years. A great choice of impressive properties and available to purchase at a lower cost: it’s a win-win. If you have been waiting to buy that thatched cottage in the perfect location but one never seems to come to the market – well, look again.

In figures:

Imagine the purchase of a holiday let, a 3-4 bedroom country cottage that costs £500,000. Labour’s autumn budget 2024 will mean that the new owner must pay 5% SDLT instead of 3% so an extra 2% or £10,000.

However, there’s actually opportunity to save money, something that’s achievable due to the current market conditions. The property in question here will have lost significant value compared to six months ago. We’d estimate that such types of property have fallen by at least 10%: this £500,000 could have initially cost the buyer around £555,000 in early 2024, so there’s a saving on the purchase price of about £55,000.

So, although buyers will be faced with increased SDLT, the overall cost is smaller for the buyer and it’s for this reason that HCM is seeing an influx of buying activity.

To conclude

Finding the right holiday let property can be difficult: buyers want to find the perfect house that looks beautiful and is nestled in a prime tourist location. Thanks to people selling their second properties at speed, there are now more and more attractive, great-quality homes coming onto the market that are ideal for holiday letting. The bonus is that these properties are now priced competitively, too.

If you’re hoping to buy a holiday let property and start your holiday let dream, then don’t worry about the government’s autumn budget 2024. The market for holiday lets looks buoyant and here at HCM, we are optimistic about the future of the industry.